A tough negotiating stance by the Theresa May’s government will only up the risks of a hard Brexit. If the free-movement of labour, a key concept of the EU, is disagreed upon, business sentiments will dip even further, signalling a hard Brexit.
As per the Chartered Institute of Personnel Development, British employers expect to hire fewer staff in late 2016 and pay levels are likely to remain lower than next year’s inflation rate, Britain prepares to act on its decision to leave the European Union.
According to the industry body, more employers expect to hire staff than cut them in this year’s fourth quarter. However the net employment balance has slowed to +22 in this latest survey from its previous quarter of +27.
In real world terms, this translated to a likelihood of a fall in wages, next year, which will be a fall for two consecutive quarters, with employers eexpecting to raise basic pay by just 1.1%.
“The report points to the UK economy beginning to face some likely headwinds following the UK’s decision to leave the European Union,” said Gerwyn Davies, a labour market analyst at the CIPD, said.
He went on to add, “Pay expectations are already weak, and as inflation moves up we can expect a period of low or negative real wage growth for the squeezed middle.”
In September this year, the annual inflation rose to 1.0% and is expected to climb to 3.0% by the end of next year. With inflation levels picking up the value of the British pound has begun depreciating. As of now, the British labour market and the broader economy has largely weathered the mild initial aftershocks of the referendum. It is to be seen how these will be affected once Britain triggers article 50 of the Lisbon Treat and kickstarts divorce proceedings.
With British Prime Minister, Theresa May’s government, saying it could formally launch divorce talks, economists expect the jolts to the economy to be much stronger.
The British government has suggested that it will take a tough stance with the bloc thus raising concerns as to how much of the EU’s single market it will still manage to tap, if at all.
A separate survey by Markit, a financial data firm, showed business sentiment in Britain hit a new low of over 4 years.
As per the CIPD report, employers were very concerned about their ability to recruit workers from the EU, with just 6% favouring a hard Brexit, which could result in the clamping down of free movement of labour from the EU.
“For years, the UK has been one of the most attractive countries for EU workers, benefiting from easy access to a large, European talent pool,” said John L. Marshall, Adecco Group’s CEO.
Brexit has been “a wake-up call” for employers to invest more in training, said Marshall.